Vince Cable and I frequently differ on our views about business, but I applaud his intervention this week on the issue of pay.
The Business Secretary has written to the boards of our largest companies reminding them that the way they set pay for their senior managers can undermine public trust.
He is right. For many years, companies have set up elaborate pay schemes which were designed to align senior managers with the interest of shareholders. In practice, pay has often been excessive and rewarded short term, rather than long term, behaviour.
This matters, because pay matters to all of us, and there are many signals that we are not getting it right. In Parliament I have been discussing ways to encourage companies to pay the living wage – a level of pay, set above the minimum wage that enables a person, or a family, to afford the basics of life. Our own council has adopted this, but the real impact will come when the private sector embraces the concept.
Pay matters because we need to keep encouraging people in to work. Earning a living has many positive benefits for self esteem and for enabling families to plan for the future. The planned Universal Credit system will reverse the disincentives to these efforts currently embedded in the benefit system. It may take time to roll out, but better to get this right than to rush.
However, the fundamental pay issue is that, now that the Government’s long term economic plan is starting to restore growth, pay rates – particularly for people on, or below, average earnings – need to start to rise again. Latest figures show this is now happening, and in Bedford, average weekly pay has moved from below the national average in 2010 to be above the average now. But there is still a long way to go.